Enact (ACT) - 2025 Q2 - Quarterly Results

Executive Summary Second Quarter 2025 Performance Overview Enact reported strong second quarter 2025 results with GAAP Net Income of $168 million and Adjusted Operating Income of $174 million. The company saw a 1% increase in primary insurance in-force, maintained robust PMIERs sufficiency, and increased its full-year capital return guidance to approximately $400 million - GAAP Net Income: $168 million, or $1.11 per diluted share[1] - Adjusted Operating Income: $174 million, or $1.15 per diluted share[1] - Primary Insurance in-force: $270 billion, a 1% increase from second quarter 2024[1] - PMIERs Sufficiency: 165% or approximately $2.0 billion[1] - Increased Full-Year Capital Return Guidance to Approximately $400 million[1] CEO Statement CEO Rohit Gupta emphasized the resilience of Enact's business model and consistent execution, highlighting continued growth in insurance in-force, robust risk and expense management, and strong capital returns. He expressed confidence in the housing market fundamentals and the company's ability to deliver long-term value - CEO Rohit Gupta stated, "Our strong second quarter results underscore the resilience of our business model and the consistency of our execution"[2] - Company continues to grow insurance in-force, maintain robust risk and expense management, and deliver strong capital returns while investing in the business[2] - Confidence in the fundamentals of the housing market and ability to deliver long-term value for stakeholders[2] Key Financial Highlights (Table) This table provides a comparative summary of Enact's key financial and operational metrics for the second quarter of 2025, first quarter of 2025, and second quarter of 2024, illustrating trends in profitability, insurance activity, and financial strength Key Financial Highlights | (In millions, except per share data or otherwise noted) | 2Q25 | 1Q25 | 2Q24 | | :--- | :--- | :--- | :--- | | Net Income (loss) | $168 | $166 | $184 | | Diluted Net Income (loss) per share | $1.11 | $1.08 | $1.16 | | Adjusted Operating Income (loss) | $174 | $169 | $201 | | Adj. Diluted Operating Income (loss) per share | $1.15 | $1.10 | $1.27 | | NIW ($B) | $13 | $10 | $14 | | Primary Persistency Rate | 82% | 84% | 83% | | Primary IIF ($B) | $270 | $268 | $266 | | Net Premiums Earned | $245 | $245 | $245 | | Losses Incurred | $25 | $31 | $(17) | | Loss Ratio | 10% | 12% | (7)% | | Operating Expenses | $53 | $53 | $56 | | Expense Ratio | 22% | 21% | 23% | | Net Investment Income | $66 | $63 | $60 | | Net Investment gains (losses) | $(7) | $(3) | $(8) | | Return on Equity | 13.0% | 13.1% | 15.4% | | Adjusted Operating Return on Equity | 13.4% | 13.4% | 16.9% | | PMIERs Sufficiency ($) | $1,961 | $1,966 | $2,057 | | PMIERs Sufficiency (%) | 165% | 165% | 169% | Detailed Financial and Operating Review Second Quarter 2025 Financial and Operating Highlights Enact's second quarter 2025 performance showed stable net premiums earned, improved losses incurred quarter-over-quarter, and increased net investment income. New insurance written surged sequentially, and primary insurance in-force continued to grow, while capital and liquidity remained robust with strong PMIERs sufficiency Income Statement Performance - Net Income: $168 million (2Q25), up from $166 million (1Q25), but down from $184 million (2Q24)[6] - Adjusted Operating Income: $174 million (2Q25), up from $169 million (1Q25), but down from $201 million (2Q24)[6] - Net Premiums Earned: $245 million (2Q25), approximately flat from 1Q25 and modestly increased from 2Q24, driven by premium growth from attractive adjacencies and IIF, mostly offset by higher ceded premiums[6] - Losses Incurred: $25 million (2Q25) with a 10% loss ratio, improved from $31 million (1Q25) and 12%, but higher than $(17) million (2Q24) and (7)%. Reserve release of $48 million from favorable cure performance[6] - Net Investment Income: $66 million (2Q25), up from $63 million (1Q25) and $60 million (2Q24), driven by elevated interest rates and higher average invested assets[6] Operational Metrics - New Insurance Written (NIW): Approximately $13 billion (2Q25), up 35% from 1Q25, primarily due to seasonality, and modestly down from 2Q24. Comprised of 96% monthly premium policies and 93% purchase originations[6] - Primary Persistency Rate: 82% (2Q25), down from 84% (1Q25) and 83% (2Q24). Approximately 7% of the mortgages in the portfolio had rates at least 50 basis points above June 2025's average mortgage rate of 6.8%[6] - Primary Insurance In-Force (IIF): $270 billion (2Q25), up approximately 1% from $268 billion (1Q25) and $266 billion (2Q24)[6] - Operating Expenses: $53 million (2Q25) with a 22% expense ratio, flat QoQ, and down YoY from $56 million (2Q24) due to prior year restructuring costs[6] Capital and Liquidity - PMIERs Sufficiency: 165% and $2.0 billion above the PMIERs requirements (2Q25), consistent with 1Q25[6] - Cash and Invested Assets: Enact Holdings, Inc. held $345 million in cash and cash equivalents plus $306 million of invested assets as of June 30, 2025. Combined cash and invested assets decreased $3 million from the prior quarter[6] - Dividend Paid: Approximately $31 million, or $0.21 per share, dividend paid in 2Q25[6] - EMICO Dividend: Approximately $130 million dividend completed by EMICO in 2Q25, primarily to support capital returns and bolster financial flexibility[6] Corporate Actions and Outlook Recent Events Enact actively managed its capital structure through significant share repurchases, completing a $250 million authorization and continuing under a larger $350 million authorization. The company also declared its regular quarterly dividend - Share Repurchases (2Q25): Approximately 2.4 million shares repurchased at an average price of $35.45 for a total of approximately $85 million[13] - Share Repurchases (through July 25, 2025): Additional 0.8 million shares repurchased at an average price of $35.86 for a total of $30 million[13] - Repurchase Authorization: Completed $250 million share repurchase authorization announced May 1, 2024. Approximately $262 million remained of the $350 million repurchase authorization as of July 25, 2025[13] - Quarterly Dividend Declared: $0.21 per share, payable on September 8, 2025, to shareholders of record on August 18, 2025[13] Capital Return Strategy Enact increased its full-year 2025 capital return guidance to approximately $400 million, emphasizing that the final amount and form will depend on business performance, market conditions, and regulatory approvals - Full-Year 2025 Capital Return Guidance: Increased to approximately $400 million[13] - The final amount and form of capital returned to shareholders will depend on business performance, market conditions, and regulatory approvals[13] Company Information and Disclosures About Enact Enact (Nasdaq: ACT), operating principally through its wholly owned subsidiary Enact Mortgage Insurance Corporation since 1981, is a leading U.S. private mortgage insurance provider. The company partners with lenders to offer best-in-class service, underwriting expertise, and extensive risk and capital management to facilitate homeownership - Enact (Nasdaq: ACT) is a leading U.S. private mortgage insurance provider, operating through its wholly owned subsidiary Enact Mortgage Insurance Corporation since 1981[11] - Committed to helping more people achieve the dream of homeownership by partnering with lenders to provide best-in-class service, underwriting expertise, and risk/capital management[11] Investor Relations Information Enact has posted its second quarter 2025 financial supplement and earnings presentation on its investor relations website. A conference call is scheduled for July 31, 2025, with pre-registration required for Q&A participants, and a live webcast available for others - Press release, second quarter 2025 financial supplement, and earnings presentation are posted on https://ir.enactmi.com[8](index=8&type=chunk) - Conference call to discuss financial results scheduled for Thursday, July 31, 2025, at 8:00 a.m. (Eastern)[9] - Participants interested in Q&A must pre-register; a live webcast will be available on the company's website for those not asking questions[9] Forward-Looking Statements (Safe Harbor) This section outlines the nature of forward-looking statements in the communication, emphasizing that actual results may differ materially due to various risks and uncertainties. These risks include economic downturns, changes in GSEs, competition, and regulatory factors. Enact disclaims any obligation to update these statements, except as required by law - Communication contains "forward-looking statements" regarding expected financial and operational results, capital return guidance, and management quotations[12] - These views involve risks and uncertainties that are difficult to predict, and actual results may differ materially from those discussed[12] - Factors that could cause differences include economic downturns, changes in Fannie Mae and Freddie Mac (GSEs), competition, and increases in federal government mortgage insurance programs[12][14] - Enact undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise, except as required by applicable law[14] Non-GAAP Financial Measures Explanation Enact uses non-GAAP financial measures such as "adjusted operating income (loss)" and "adjusted operating return on equity" to provide insights into ongoing business operations. These measures exclude non-operating items like net investment gains/losses, restructuring costs, and debt extinguishment gains/losses, which are not considered indicative of fundamental operating activities - Non-GAAP financial measures include "adjusted operating income (loss)," "adjusted operating income (loss) per share," and "adjusted operating return on equity"[15] - Adjusted operating income (loss) excludes after-tax effects of net investment gains (losses), restructuring costs, and infrequent or unusual non-operating items, and gain (loss) on the extinguishment of debt[15] - These measures are considered useful to investors and management for identifying income attributable to the ongoing operations of the business, as they exclude items not related to operating performance[16] - Reconciliations of net income (loss) to adjusted operating income (loss) and U.S. GAAP return on equity to adjusted operating return on equity are provided in tables[17] Financial Exhibits Consolidated Statements of Income (Exhibit A) This exhibit presents the detailed consolidated statements of income for Enact for the second quarter of 2025, first quarter of 2025, and second quarter of 2024, providing a breakdown of revenues, losses and expenses, net income, and per-share data, including GAAP and adjusted operating figures Consolidated Statements of Income (Exhibit A) (In thousands) | | 2Q25 | 1Q25 | 2Q24 | | :--- | :--- | :--- | :--- | | REVENUES: | | | | | Premiums | $245,289 | $244,786 | $244,567 | | Net investment income | 65,884 | 63,037 | 59,773 | | Net investment gains (losses) | (7,343) | (3,243) | (7,713) | | Other income | 1,060 | 2,196 | 2,207 | | Total revenues | 304,890 | 306,776 | 298,834 | | LOSSES AND EXPENSES: | | | | | Losses incurred | 25,289 | 30,541 | (16,821) | | Acquisition and operating expenses, net of deferrals | 50,598 | 50,094 | 53,960 | | Amortization of deferred acquisition costs and intangibles | 2,205 | 2,429 | 2,292 | | Interest expense | 12,296 | 12,291 | 13,644 | | Loss on debt extinguishment | 0 | 0 | 10,930 | | Total losses and expenses | 90,388 | 95,355 | 64,005 | | INCOME BEFORE INCOME TAXES | 214,502 | 211,421 | 234,829 | | Provision for income taxes | 46,694 | 45,643 | 51,156 | | NET INCOME | $167,808 | $165,778 | $183,673 | | Net investment (gains) losses | 7,343 | 3,243 | 7,713 | | Costs associated with reorganization | (24) | 629 | 3,435 | | Loss on debt extinguishment | 0 | 0 | 10,930 | | Taxes on adjustments | (1,537) | (813) | (4,636) | | Adjusted Operating Income | $173,590 | $168,837 | $201,115 | | (1) Loss ratio | 10 % | 12 % | (7)% | | (2) Expense ratio | 22 % | 21 % | 23 % | | Earnings Per Share Data: | | | | | Net Income per share | | | | | Basic | $1.12 | $1.09 | $1.17 | | Diluted | $1.11 | $1.08 | $1.16 | | Adj operating income per share | | | | | Basic | $1.16 | $1.11 | $1.28 | | Diluted | $1.15 | $1.10 | $1.27 | | Weighted-average common shares outstanding | | | | | Basic | 149,940 | 151,831 | 157,193 | | Diluted | 150,729 | 152,907 | 158,571 | Consolidated Balance Sheets (Exhibit B) This exhibit provides the consolidated balance sheets for Enact as of June 30, 2025, March 31, 2025, and June 30, 2024, detailing assets, liabilities, and shareholders' equity. It includes key metrics such as total investments, cash and cash equivalents, loss reserves, total equity, and book value per share Consolidated Balance Sheets (Exhibit B) (In thousands) | Assets | 2Q25 | 1Q25 | 2Q24 | | :--- | :--- | :--- | :--- | | Investments: | | | | | Fixed maturity securities available-for-sale, at | | | | | fair value | $5,896,818 | $5,815,337 | $5,331,345 | | Short term investments | 3,001 | 3,696 | 12,313 | | Total investments | 5,899,819 | 5,819,033 | 5,343,658 | | Cash and cash equivalents | 612,967 | 635,269 | 699,035 | | Accrued investment income | 53,259 | 49,654 | 45,317 | | Deferred acquisition costs | 22,910 | 23,322 | 24,619 | | Premiums receivable | 44,091 | 46,451 | 48,698 | | Other assets | 107,882 | 103,351 | 98,929 | | Deferred tax asset | 32,545 | 44,440 | 89,116 | | Total assets | $6,773,473 | $6,721,520 | $6,349,372 | | Liabilities and Shareholders' Equity | | | | | Liabilities: | | | | | Loss reserves | $551,940 | $542,528 | $508,138 | | Unearned premiums | 101,205 | 107,519 | 129,870 | | Other liabilities | 153,447 | 208,667 | 143,167 | | Long-term borrowings | 743,753 | 743,399 | 742,368 | | Total liabilities | 1,550,345 | 1,602,113 | 1,523,543 | | Equity: | | | | | Common stock | 1,484 | 1,508 | 1,561 | | Additional paid-in capital | 1,927,372 | 2,007,776 | 2,220,903 | | Accumulated other comprehensive income | (104,342) | (152,482) | (236,305) | | Retained earnings | 3,398,614 | 3,262,605 | 2,839,670 | | Total equity | 5,223,128 | 5,119,407 | 4,825,829 | | Total liabilities and equity | $6,773,473 | $6,721,520 | $6,349,372 | | Book value per share | $35.20 | $33.96 | $30.91 | | Book value per share excluding AOCI | $35.90 | $34.97 | $32.43 | | (1) U.S. GAAP ROE | 13.0 % | 13.1 % | 15.4 % | | Net investment (gains) losses | 0.6 % | 0.3 % | 0.6 % | | Costs associated with reorganization | 0.0 % | 0.0 % | 0.3 % | | (Gains) losses on early extinguishment of debt | 0.0 % | 0.0 % | 0.9 % | | Taxes on adjustments | (0.1)% | (0.1)% | (0.4)% | | (2) Adjusted Operating ROE | 13.4 % | 13.4 % | 16.9 % | | Debt to Capital Ratio | 12 % | 13 % | 13 % |